All posts in category Financial LIteracy

Money is merely a tool, which means that money itself is not THE culprit. If stays where we leave it, it goes where we move it to. With that as a backdrop, let’s look at two scenarios:

More earnings mean more wealth Y N

Not necessarily as money is easily spent. Data from the U.S. Bureau of Economic Analysis reports that the personal savings rate is at about 3.20% of income with lesser income earners saving more than higher income earners. The data continued to show that we exhibit one of the lowest savings rates of developed countries; only Spain, China, and Australia save less than we do, currently.

Money Can Buy Happiness Y N

Yes, up to a point. Think of what that Powerball lottery could do for you! Science has researched this question and found that how we spend money has an influence on our happiness. Research shows that happiness is increased when we spend money on others more than on ourselves. Does this have to do with experiencing satisfaction? I don’t know, I am merely asking. One study, I remember reading from the Weatherhead School of Management at Case Western University, indicated that once people earn more than $200,000, their level of happiness did not increase significantly.

Money is very personal. Being personal, it is important that you understand what money means to you, so it can be the sharpest tool in your tool chest, doing what you want it to do for you!

Step back for a minute, and take inventory. The inventory I would like you to take consists of: the ease at which you enter conversations about money.

First, take note of what the intention of the money conversation you are about to begin is. If your intention is to blame, shame, or guilt someone else’s behaviors or actions, this conversation could very well be difficult to have. Who wants to be part of a conversation where accusations or disappoints are hurled? I do not know anyone who wants to be part of that.

Reframe your intention so it is not about how you want the other person to feel, but instead, determine what it is you want to achieve from the conversation. For example, let’s say you do not like the spending habits of your spouse or partner and want to let them know this…yet again. Instead of wanting to express how inappropriate you think it is for them to spend as much as they do, talk about how important it is for you to save. Then ask for their support on how to add a savings to your money activities.

When you know what true intention to the conversation you want to have, you can initiate that conversation without attaching attributes of shame, blame, or attack to the person with whom you are having the money conversation. Instead, you are collaborating to further your intentions rather than looking to release an arrow laced with contempt towards someone else’s feelings.

Second, look at what outcome you want from your money conversation. Using the last example, your preferred outcome may be to start a savings program. It is important to know what outcome you are aiming for so you can use this outcome as your reference and return to it when you use trigger points leading the conversation down rabbit holes to discord.

When money conversations are difficult to initiate, know your underlying intention for the conversation you want to have. From there, identify the outcome you want so you can communicate that to your partner. Remember to return the conversation to its intended focus when it goes astray.

• The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind. -T.T. Munger
Saving is a beneficial life-long exercise.

• You can’t manage what you don’t measure. -Bhaj Townsend
It is important to know what your money is for, so you can determine how to manage it.

• Wealth consists not in having great possessions, but in having few wants. -Epictetus.This still rings true centuries after this Turkish slave, who grew up to be a formidable Greek philosopher, said it.

• Money without meaning is like candy without a wrapper. It’s too easy to devour without restraint-Bhaj Townsend
Now that rings true!

• If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed. –Edmund Burke.
How true this can be.

• This year, money and I will be friends, and not part company as easily and as often as last year. -Bhaj Townsend
An excellent decision to follow through on.

• It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for. Robert Kiyosaki.
Yes, indeed.

• Money is gone, for most families, by the end of the third generation because the system for understanding its purpose wasn’t built, or communicated or sustained. -Bhaj Townsend
This is so sad because it is avoidable.

According to a survey by Wells Fargo, nearly half (44%) of those surveyed said that money conversations were the toughest to have, more difficult even than religion, politics or death. If you find that you are one of those who find it difficult to initiate or be in important conversations, you will want to read further. Money holds a lot of judgmental emotions and tension as inappropriate behaviors can usurp the initial intention of the money topic.

Let’s examine the following situations: You are at a dinner with friends and the bill comes. What happens next? Do you grab the bill? Do you wait for someone else to make a move? Do you talk about splitting it in half or per everyone’s individual order?

And how about this situation: You are invited to join an “By Invitation Only” group on a long weekend retreat. The group really wants you to join them but you know you do not have the extra money put aside for this. What do you tell them? Do you make up another “reason” for not being able to join them? Do you tell them you will think about it as a way to avoid talking about it? Do you put it on a credit card knowing it will take you eighteen months to pay it off as well as the other items on your credit card accruing interest each month?

It is so easy in these situations, and many others, to keep your thoughts to yourself; those thoughts like: “Let’s split the bill per each individual’s order.” “I can’t come this year, but let me know the cost for next year, so I can save up for it.” You do not want to appear different, inadequate, or bothersome. You want to do what everyone else is so seemingly agreeable to doing.

Unresolved money conversations create tension because you add a perspective of shame, guilt or judgment about you and money. But when you start talking about money openly and without the shame, guilt, or judgment built into the conversation, you can develop respect and understand around money and your role with it. But how do you do this?

There are two steps you can take immediately to begin to reframe your behaviors with money. The first is to understand what money was like growing up for you. I call this understanding your money stories. Begin by asking yourself: “How was money talked about when I was little?” “What did I do with allowances or financial gifts that I received when I was growing up? How did I talk with my friends about money when I was a teenager?” These and many other questions will give you insight into your own early views on money. You will probably recognize patterns you use today due to your early associations with money.

The second step you can take is to determine how you are going to handle money situations when others are involved, before the event happens. If you are going out for dinner with others, you can send a quick text to share your idea of splitting the bill. Prepare a response when you are asked to join events you cannot afford. Letting people know you have not allocated an amount for a particular “retreat” or other event to your budget presents a sense of responsibility with your money.

I know this just scratches the surface of changing money behaviors and habits but I thought it was important to talk about this.

Let me know how you handle money so money is an ally to you and your goals in life. I would be delighted to hear from you.

Over time, money becomes a system of repeated behaviors. If you grew up spending money, you are most likely to continue that habit, as an adult. If you grew up with philanthropy as a meaningful way to help causes that are important to you, you are most likely to continue doing so as an adult. If you were accustomed to asking your parents for more money as a kid, to supplement what you earned or what you were given, this behavior will likely continue with credit cards substituting as your parents’ source for more.
It is not easy to change a habit once it has been ingrained, even when you want to. You may have discovered that as you have attempted to change food, exercise or your own money habits. Why is it so hard?
Well, it seems to be all in our head. Researchers have found a small region of the prefrontal cortex responsible for switching on and off our habits. This area, as the command center, also controls planning and thinking.
Using rats as their subjects, researches at M.I.T. (Massachusetts Institute of Technology) found that some habits are flexible rather than ingrained. The IL (infralimbic) cortex can form new habits from the constant moment to moment decisions and actions we make. As we all know, who have ever changed habits, it takes time, patience, support when the “old habit” kicks back in and a method back to the new habit.
One of the toughest things to deal with is changing a habit or behavior once you figured it doesn’t work for you. When it comes to your money, If you know you have a habit that needs to change, such as a chronic pattern of over spending, consider these 3 essential tips to help you form new productive habits.
Begin by asking yourself these three questions:
1 What does the overspending give me (what is the emotional pay off this overspending provides)? We have to examine the emotional payoffs as this is often the contributor to our habits. You may have to really examine this closely. There is some need the overspending is filling. What is it?

2 What habits do I want to have with my money spending?

3 What first step can I take to model the habit(s) I know will be productive for me.
Although this is merely a primer to help you change a habit, if you can begin here, you will have taken powerful steps to changing your money habit. You can thank your IL cortex for the role it had later.Tell me what you discover about the money habits you commit to changing.

It is important for couples who are arguing over money to take a moment to change the narrative. Instead of rehashing the perceived problem, engage in a different conversation about money. Start your next conversation with a question.

The type of question you ask is critical. For starters, ask open ended questions as they elicit a more expressive response. Listen to the responses you receive, not merely for information but for feelings and intentions behind the words that the responder provides. Seek to understand them so you can create bridges to a conversation that brings you both to a satisfying outcome. Ask questions like:

“How did you observe about money when you grew up?”

“What did your Mother teach you about money overtly and covertly?”

“What did your Dad teach you about money overtly and covertly?”

“What did you like to do with your money as a child and how did that make you feel?”

What is an example of a challenge you have had with money and how did you successfully face that challenge?”

“What is something you are proud to have done that increased your savings?”

“What would you like to change with your current money management?

“What are three things that are important to you about money?”

There are many more questions that can be asked but I wanted to get you started. You may think of ones on your own as well. The key point is to remember to make your questions open ended and inquisitive rather than confrontational. A question like: “Why don’t you save money?” is more confrontational than “What is important about saving money to you?” which is more inquisitive and invites understanding. People want to be understood and it is important that questions be framed to do that.

Changing the framework of money conversation is beneficial for two big reasons:

It gives context to someone’s current views and behaviors around money.

It can transform the existing anxieties about money to understanding where the other person’s views on money derived.

Have your conversations be ones built on respect and understanding as you develop strategies to your productive conversations about money.

One final thought: share your responses to these questions as well…after the person you are engaged in the conversation with is done with their response to the question you asked. Trust is built when people feel listened to and understood. Here is an opportunity to listen, share, seek and offer a bridge to understanding.

Would you like more guidance as move your money conversations from mess to success? I would love to help you! Send me an email at bhaj@focusasndsustain.com and let me know an issue you are facing with your money. Let’s get you on track to having money conversations that work for you.

Money conversations are not always easy. Surveys by the Certified Divorce Financial Analysts show that money is one of the top causes of divorce while Think Health Magazine finds it to be one of the top two causes of divorce.

Dr. Brad Klontz a financial psychologist and associate professor at Kansas State University has found that money anxieties are fostered because people are not generally used to talking about money in a substantive manner. Too often it can “seem like a mind field that can easily go wrong, Brad says.

Couples can find that there disparate upbringing, experiences and expectations around their money spill into their expectations and judgments of their partner’s habits and behaviors. Of course, their partner had their own set of money experiences growing up that they bring into the relationship. Because “much of their beliefs around money are held in their unconscious,” Brad continues, “they really don’t come out to play until you are in a relationship.” These money stories and scripts can play havoc on primary relationships when the current money habits and behaviors play out.

Allianz’s LoveFamilyMoney Study, conducted in 2014 with over four thousand adults, found that financial issues causing the most stress in spouses were: planning for future needs at 76%, covering current financial expenses at 62%, and getting out of debt at 56%. Allianz’s study further revealed that 28% felt they spent too much on unnecessary things, 29% said their financial baggage was difficult to overcome and 23% were not saving enough money.

Resentments can build when the right conversations are not held. It is important for couples who are arguing over money to take a moment to change the narrative. Instead of rehashing the perceived problem expressed by “the other person,” engage in a different conversation about money. Asking the right questions, which we will delve into in the next blog, make a big difference to feeling like you have a strong financial partnership.

How are money conversations in your home? Let me know. If they are precarious, our next blog will introduce conversation tips to transform your home money anxieties to understanding and resolutions.

When money can be talked about without the added emotions of hidden blame or unrelenting shame, money conversations can become like other productive conversations: meaningful and connective. When money conversations become supportive rather than decisive, money conversations can beengaging and powerful. Instead of blaming others for their behaviors or shaming ourselves for behaviors and habits we are exhibiting, we become supportive of another’s and our own objectives with money. We become engaged in conversations as we understand others and our own motives and intentions with their and our own money. We can then put in play powerful actions to attain our common objectives. What makes this transformation from feeling divided to feeling unified around money?

When we understand each other’s views and stories about money, we become more engaged with their struggles and triumphs with money. When we take money “out of the closet” of isolation, blame, or shame, and bring it into our shared lives, as partners and as a family, money becomes a productive tool.

What restrains you from talking about money? Is it lack of confidence on your ability to make consistently good decisions about money? Is it an inability to engage your partner in conversations you think are important with your money? Is it an inability to know how to approach planning your financial goals? Is it an inability find time to spend on financial matters and if you had the time, not knowing how to frame a conversation on financial matters? Is it a fear that conversations about money will lead to tension or disinterest from your partner? These can be dealt with productively and effectively.

The first question you can ask someone you share finances with is: What is important about money to you? And let them response without interruption from you. You can learn a lot by asking this one question.

When you find out what is important about money to yourself and to those with whom you share financial interests, money will transform from being hard to talk about to being a welcomed subject of conversation in your house.

Let me know what keeps you isolated with your money or, how you have created a bridge from isolation around your money to it being a productive tool in your and your family’s life.

It is estimated that 20,000 families will each transfer over $20,000,000 to the next generation next year. They will continue doing so, it is forecasted, for the next twenty-nine years. Although this may sound fortuitous, research tells us that 70% of these families will find their wealth gone by the end of the second generation and by the end of the third generation 90% of these families will find their wealth squandered or spent. Unless they take steps to keep the wealth, families will find themselves falling into this statistic.

Money that has been amassed, will be gone, for most families, by the time their grandchildren are thinking about what they can pass to their heirs. The great estate and trust planning coupled with the precise tax and investment positioning, although essential, is not enough. There is an element that most families do not put in place to ensure that their money passes to next generations intact. And that missing element is the preparation of the family for the receipt of the money.

Heirs need a blueprint and a roadmap to know how to sustain the wealth through the generations. They need to master skills of leadership, and family cohesion to successfully steward their new responsibilities associated with the money. Only when families have and master the roadmap to success, will they be able to grow cohesively as a family for many generations.

Let me know how your family is attending to preparing the family for its roles as financial beneficiaries. What kind of conversations are you having? How do family members feel about this forthcoming transfer? How is the family talking about the transfer of financial stewardship?

Debt is back, big time. The tightening that occurred after the crash of 2008 has been replaced by debt approaching $1 trillion dollars. And it shows no signs of abating.

Student loans and credit cards may be good for the issuers who capture more revenue through high interest loans and late fees but they are creating a pool of consumers sinking deeper and deeper into debt.

Credit card debt has already surpassed the pre-2008 crash levels, per WalletHub. Thirty-four billion dollars was added to credit cards in the last quarter of 2016 alone WalletHub found. To add to that increase, in the same period there was a record low payback of debt.

In my conversations with Millennials, I hear a range of concern about their debt. Some do all they can to avoid debt by delaying college until they can afford to pay for it or work for companies that will pay for their college education. I know one Millennial who has $300,000 in student loans. She told me that it is the price she has had to pay to attain her law degree. Although the debt does add stress to her life, she does not want it to confine her life to just working. She figures she will have this debt all her life and hopes that the government will one day forgive it.

What have we done, where we have created a society saddled with debt as a way of life? Is this a sustainable model? I do not think so. It may seem to work for a generation but it is not a sustainable model for financial strength. Ongoing and mounting debt gnaws at the edges of the fabric of freedom, independence and self-worth. Debt is a burden. It may not direct all our actions but it directs our thoughts on how we think of ourselves.

Tell me your thoughts and how you deal with debt in your own life. I would love to hear your thoughts on this mighty subject.